Agnity India Technologies Pvt. Ltd., Noida V. DCIT, New Delhi

ITA 6485/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6863 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 21-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 28-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A M GOVIL
• Assessee Lawyers: Not Found
• Keywords: Transfer pricing; International transaction; question of law; wholly owned subsidiary; Bad and doubtful debts
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-2 NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH.L.P.SAHU, ACCOUNTANT MEMBER I.T.A . NO.-6485/DEL/2012 (ASSESSMENT YEAR-2008-09) AGNITY INDIA TECHNOLOGIES PVT.LTD., C-42, SECTOR-58, NOIDA. PAN-AABCB2399B (APPELLANT) VS DCIT, CIRCLE-1(1), NEW DELHI. (RESPONDENT) APPELLANT BY SH . ROHIT TIW ARI, CA RESPONDENT BY SH . A.M. GOVIL, CIT(DR) DATE OF HEARING 21.04.2016 DATE OF PRONOUNCEMENT 19 .0 7 .2016 O R D E R PER DIVA SINGH, JUDICIAL MEMBER THE PRESENT APPEAL HAS BEEN LISTED FOR HEARING ON REMAND PURSUANT TO THE ORDER DATED 05.08.2015 PASSED BY THE HONBLE HIGH COURT I N ITA NO.488/2014. THE HONBLE HIGH COURT REMANDED THE APPEAL OF THE REVENUE ASSAI LING THE CORRECTNESS OF THE ORDER DATED 20.09.2013 IN ITA NO.6485/DEL/2012 AFTER BOTH THE PARTIES CONCEDED THAT THE COMPARABLES SET OUT IN PARA 2.9 OUGHT NOT TO HAVE B EEN EXCLUDED. HENCE THE APPEAL WAS RESTORED TO THE TRIBUNAL FOR FRESH DETERMINATIO N. 2. ACCORDINGLY IT WAS A COMMON STAND OF THE PARTIES B EFORE THE BENCH THAT AS A RESULT OF THIS REMAND THE ISSUE WHETHER THE FOLLOWI NG 11 COMPARABLES HAVE BEEN I.T.A .NO.-6485/DEL/2012 PAGE 2 OF 27 CORRECTLY RETAINED BY THE TPO/AO POST THE DIRECTION OF THE DRP IS TO BE ADJUDICATED UPON AFRESH:- 1. AVANI CINCOM TECHNOLOGIES 2. E- ZEST SOLUTIONS LTD. 3. FLEXTRONICS(ARICENT) 4. IGATE GLOBAL SOLUTION LTD. 5. INFOSYS 6. KALS INFORMATION SYSTEMS LTD.(SEG) 7. PERSISTENT SYSTEMS LTD. 8. SOFTSOL INDIA LTD. 9. TATA ELXSI(SEG) 10. THIRDWARE SOLUTION LTD. 11. WIPRO LTD.(SEG) 3. A PERUSAL OF THE RECORD SHOWS THAT THE EXCLUSION OF THE ABOVE 11 COMPARABLES WAS REQUESTED FOR BY THE ASSESSEE ON THE BASIS OF T HE FOLLOWING CHART IN THE ORIGINAL ROUND BEFORE THE ITAT :- 3. LD COUNSEL FOR THE ASSESSEE SHRI PAWAN KUMAR SUB MITS AS UNDER: INCLUSION OF FUNCTIONALLY DIFFERENT COMPANIES AND C OMPANIES ENGAGED IN DEVELOPMENT OF SOFTWARE PRODUCTS BY THE LD. TPO/ DRP 3.1. THE APPELLANT PLACES RELIANCE ON THE DECISION OF THE DELHI TRIBUNAL IN ITS OWN CASE DATED NOVEMBER 4, 2010 IN ITA NO. 3856 (DEL)/2 010 FOR THE AY 2006-07, WHEREIN THE TRIBUNAL HAS EXCLUDED SOFTWARE PRODUCT, FUNCTIO NALLY DISSIMILAR AND FULL FLEDGED RISK BEARING ENTREPRENEUR COMPANY (I.E. INFOSYS) AS A CO MPARABLE, IN ANALYSING THE ARMS LENGTH NATURE OF THE TRANSFER PRICE OF A CAPTIVE SO FTWARE SERVICE PROVIDER I.E. THE APPELLANT. ITAT IN A.Y. 2006-07 EXCLUDED THE ABOVE LISTED COMPARABLES FROM T.P. ADJUSTMENTS. THIS ITAT DECISION IN THE APPELLANTS OWN CASE WAS BROUGHT TO THE NOTICE OF THE TPO, AO & THE DRP VIDE OBJECTIONS FILED UN DER SECTION 144C(2) OF THE ACT. THE GIST OF THE SAME IS AS UNDER: REASONS FOR EXCLUSION S. NO. COMPANY NAME WORKING CAPITAL ADJUSTED OP/ TC MARGIN (AS PER THE REVISED TPO ORDER) REASONS FOR EXCLUSION (NON - COMPARABILITY) 1. AVANI CINCOM TECHNOLOGIES LTD. 32.70% (1) FUNCTIONALLY DIFFERE NT PRODUCT COMPANY OWNS SOFTWARE PRODUCTS LIKE DXCHANGE, TRAVEL SOLUTIONS, INSURANCE SOLUTION, CUSTOMER I.T.A .NO.-6485/DEL/2012 PAGE 3 OF 27 APPRECIATION ETC. PRODUCTS. (2) NON AVAILABILITY OF SEGMENTAL DETAILS REJECTED IN TECORDIA RULING 2. E - ZEST SOLUTIONS LTD. 34.01% FUNCTIONALLY DIFF ERENT DIVERSIFIED BUSINESSES LIKE PRODUCT ENGINEERING SERVICES, CONSULTING SERVICES, ENTERPRISE SOLUTION ETC. SERVICES. 3. FLEXTRONICS (ARICENT) 10.35% (1) DEALS IN SOFTWARE PRODUCTS AND PROVIDES SOFTWARE CONSULTING SERVICES; (2) HUGE R&D SPEND I.E. 5.8% (3) FAILS NET FIDED ASSETS FILTER I.E. 292% (4) HIGH TURNOVER OF 956 CRORES I.E. APPROX 53 TIMES. 4. IGATE GLOBAL SOLUTION LTD. 16.46% (1) DIVERSIFIED BUSINESS OPERATIONS - COMPANYS OPERATINS PREDOMINANTLY RELATE TO PROVIDING IT SERVICES, CONTRACT CENTER SERVICES AND IT ENABLED SERVICES. (2) HIGH TURNOVER OF RS. 782 CRORES I.E. APPROX 44 TIMES. 5. INFFOSYS TECHNOLOGIES LTD. 43.40% (1) DISSIMILAR FUNCTIONAL/ RISK PROFILE; (2) HAS ADVERTISING & MARKETING EXPENSES OF RS. 730 CRORES (3) OWNERSHIP OF BRANDED/ PROPRIETARY PRODUCTS. (4) HUGE R&D SPEND OF 201 CRORES (5) ONSITE SERVICES > 50% (6) HIGH TURNOVER OF RS. 15,672 CRORES (I.E. APPROX. 879 TIMES); (7) REJECTED IN THE RECENT RULINGS IN CASE OF AGNITY INDIA (APPELLANT ITSELF), MARKET TOOLS & TELCORDIA. 6. KALS INFORMATION SYSTEMS LTD. (SEG) 46.43% (1) FUNCTIONALLY DIFFERENT PRODUCT COMPANY ENGAGED IN THE BUSINESS OF SOFTWARE SERVICES AND SOFTWARE PRODUCTS (2) REJECTED IN RECENT RULINGS IN CASE OF TRILOGY & BINDVIEW (3) ERRONEOUS MARGIN COMPUTATION. 7. PERSISTENT SYSTEMS LTD. 25.25% (1) ENGAGED IN DEVELOPMENT OF SOFTWARE PRODUCTS; (2) HIGH TURNOVER OF RS. 383 CRORES I.E. APPROX 22 TIMES. 8. SOFTSOL INDIA LTD. 25.54% (F) FUNCTIONALLY DIFFERENT HIGH END SERVICES/ DIVERSIFIED OPERATIONS; PRODUCTS COMPANY. (2) NON AVAILABILITY OF SEGMENTAL DETAILS. (3) HIGHLY VOLATILE MARGINS. (4) ERRONEOUS MARGIN COMPUTATION. 9. TATA ELXSI (SEG) 22.86% (1) ENGAGED IN DIVERSIFIED BUSINESS INCLUDING THE SOFTWARE PRODUCTS. (2) HIGH TURNOVER OF RS. 343 CRORES I.E. APPROX 19 TIMES. I.T.A .NO.-6485/DEL/2012 PAGE 4 OF 27 (3) FAILS THE R&D FILTER I.E. 3.39% (4) FAILS NET FIXED ASSETS FILTER I.E. APPRROX 246$ (5) REJECTED IN TELECORDIA RULING. 10. THIRDWARE SOLUTION LTD. 24.15% (1) FUNCTIONALLY DIFFERENT PRODUCT COMPANY. (2) NON AVAILABILITY OF SEGMENTAL DETAILS. 11. WIPRO LTD. (SEG) 33.77% (1) DISSIMILAR FUNCTIONAL/ RISK PROFILE (2) OWNERSHIP OF BRANDED/ PROPRIETARY PRODUCTS. (3) HIGH TURNOVER OF RS. 1,12,58.4 CRORES (I.E. 631 TIMES) (4) HUGE R&D SPEND. (5) REJECTED IN THE RECENT RULING IN CASE OF MARKET TOOLS, TELCORDIA, MAERSK GLOBAL & DELOITTE CONSULTING. 3.1. CONSIDERING THE SAME THE COMPARABLES WERE DELETED B Y THE ITAT HOLDING AS UNDER:- 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED MATERIAL ON THE RECORD. THE ISSUE ABOUT EXCLUSION OF ABOVE LIST OF COMPARAB LES WHILE MAKING THE TP ADJUSTMENTS IN ASSESSEES CASE HAS BEEN SETTLED BY H ON'BLE DELHI HIGH COURT. IT HAS BEEN UNEQUIVOCALLY HELD THAT THOSE COMPANIES ( LIKE INFOSYS AND OTHERS) ARE FULL FLEDGED RISK BEARING COMPANIES AND ARE FUNCTIONALLY DISSIMILAR AS A COMPARABLE TO ASSESSEE WHO IS A CAP TIVE SOFTWARE SERVICE PROVIDER BY FOLLOWING OBSERVATIONS: '8. IT IS A COMMON CASE THAT SATYAM COMPUTER SERVIC ES LTD. SHOULD NOT BE TAKEN INTO CONSIDERATION. THE TRIBUNAL FOR V ALID AND GOOD REASONS HAS POINTED OUT THAT INFOSYS TECHNOLOGIES L TD. CANNOT BE TAKEN AS A COMPARABLE IN THE PRESENT CASE. THIS LEA VES L&T INFOTECH LTD. WHICH GIVES US THE FIGURE OF 11.11%, WHICH IS LESS THAN THE FIGURE OF 17% MARGIN AS DECLARED BY THE RESPONDENT- ASSESSEE. THIS IS THE FINDING RECORDED BY THE TRIBUNAL. THE TRIBUN AL IN THE IMPUGNED ORDER HAS ALSO OBSERVED THAT THE AE HAD FURNISHED D ETAILS OF WORKABLES IN RESPECT OF 23 COMPANIES AND THE MEAN O F THE COMPARABLES WORKED OUT TO 10%, AS AGAINST THE MARGI N OF 17% SHOWN BY THE ASSESSEE. DETAILS OF THESE COMPANIES A RE MENTIONED IN PARA 5 OF THE IMPUGNED ORDER. 9. IN VIEW OF THE AFORESAID POSITION, WE DO NOT THI NK THAT ANY SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATIO N. THE APPEAL IS DISMISSED.' 5.1. THUS WHILE ANALYSING THE ARM'S LENGTH NATURE O F THE TRANSFER PRICE OF A CAPTIVE SOFTWARE SERVICE PROVIDER I.E. THE APPELLAN T, THE OBJECTED COMPARABLES ARE TO BE EXCLUDED. 5.2. RESPECTFULLY FOLLOWING THE HON'BLE DELHI HIGH COURT JUDGMENT WE UPHOLD THE PLEA OF THE ASSESSEE TO EXCLUDE SUCH COMPARABLE S AND ALLOW THIS GROUND I.T.A .NO.-6485/DEL/2012 PAGE 5 OF 27 OF THE ASSESSEE. TPO/AO WILL ACCORDINGLY WORK OUT T HE TP ADJUSTMENT IN CONFORMITY OF THE HON'BLE DELHI HIGH COURT ORDER. 3.2. THE CORRECTNESS OF THIS ORDER WAS CHALLENGED IN APP EAL BEFORE THE HONBLE HIGH COURT BY THE REVENUE AND THE ABOVE FINDING WAS SET ASIDE. BEFORE THE HONBLE HIGH COURT BOTH THE PARTIES CONCEDED THAT THE ISSUE HAS TO BE REMANDED FOR A FRESH DETERMINATION. IN THE SAID BACKGROUND, IT WAS SUBM ITTED BY THE LD.AR THAT THE AFORESAID COMPARABLES CONSIDERING THE REASONS ADVAN CED FOR THEIR EXCLUSION MAY BE EXCLUDED. 4. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESS EE IS A WHOLLY OWNED SUBSIDIARY OF BAY BACKETS INCORPORATION, USA PROVIDING SOFTWAR E DEVELOPMENT SERVICES TO ITS OVERSEAS ASSOCIATED ENTERPRISES (HEREINAFTER REFERRE D TO AS AE) AND OPERATED AS A LIMITED RISK BEARING CAPTIVE SERVICE PROVIDER. THE ASSESSEE IT WAS SUBMITTED IS REMUNERATED ON AN ARMS LENGTH COST-PLUS BASIS I.E. IT IS COMPENSATED FOR ALL ITS OPERATING COSTS, PLUS A MARK-UP OF 15% THEREON. IN THE YEAR UNDER CONSIDERATION, IT WAS SUBMITTED THAT THE ASSESSEE HAD UNDERTAKEN THE FOLL OWING INTERNATIONAL TRANSACTIONS WITH ITS AE:- S.NO. DESCRIPTION OF INTERNATIONAL TRANSACTIONS AMOUNT (IN RS.) 1. PROVISION OF SOFTWARE DEVELOPM ENT SERVICES 178,333,635 2. ASSETS PROVIDED ON LOAN/RETURNABLE BASIS BY THE AE 12,685,075 4.1. DURING THE FY 2007-08, THE ASSESSEE WAS STATED TO B E ENGAGED IN PROVIDING SOFTWARE DEVELOPMENT SERVICES TO ITS AES. IT WAS EX PLAINED THAT THE ASSESSEE CARRIES OUT ROUTINE FUNCTIONS AND ASSUMES MINIMAL RISKS ASS OCIATED WITH CARRYING OUT SUCH BUSINESS. THE ACTIVITY WAS STATED TO BE CARRIED OU T IN A BUSINESS WHICH WAS RISK- INSULATED. THE ASSESSEE WAS STATED TO BE PRIMARILY INVOLVED IN THE LAST THREE STAGES OF I.T.A .NO.-6485/DEL/2012 PAGE 6 OF 27 THE SOFTWARE DEVELOPMENT LIFE CYCLE I.E. CODING, TE STING AND POST-PRODUCTION SUPPORT. THESE ACTIVITIES IT WAS SUBMITTED WERE EITHER WHOLL Y OR PARTLY SUB-CONTRACTED BY GROUP COMPANIES TO THE ASSESSEE AND THE ASSESSEE ALSO HEL PS GROUP COMPANIES IN THE CUSTOMIZATION OF THE SOFTWARE AS PER THEIR CLIENTS REQUIREMENTS. 4.2. THE ISSUE IN THE PRESENT APPEAL PERTAINS TO PROVISI ON OF SOFTWARE DEVELOPMENT SERVICES WHEREIN USING MULTIPLE YEAR DATA THE ASSES SEE SELECTED THE TRANSACTIONAL NET MARGIN METHOD (HEREINAFTER REFERRED TO AS TNMM) A S THE MOST APPROPRIATE METHOD AND TOOK PROFIT LEVEL INDICATOR (HEREINAFTER REFERR ED TO AS PLI) AS OPERATING PROFIT/TOTAL COST (HEREINAFTER REFERRED TO AS OP/T C) AND SELECTED 16 COMPARABLES WHOSE AVERAGE MEAN WORKED OUT TO 12%. CONSIDERING T HAT ITS OWN MARGIN OF 15.11% WAS HIGHER THAN THE MARGIN OF THE COMPARABLES THE A SSESSEE CLAIMED THAT THIS TRANSACTION WAS AT ARMS LENGTH. 4.3. THE TRANSFER PRICING OFFICER (HEREINAFTER REFERRED TO AS TPO) REJECTED THE TRANSFER PRICING STUDY AND DIRECTED A FRESH SEARCH TO BE MADE USING SINGLE YEAR DATA AS OPPOSED TO MULTIPLE YEAR DATA USED BY THE TAXPAYER. IN THE FRESH SEARCH 9 COMPARABLES WERE OFFERED BY THE ASSESSEE WITH AN ARITHMETIC MEA N OF 12.01%. RETAINING A FEW OF THE COMPARABLES OFFERED BY THE ASSESSEE, THE TPO AD OPTED THE FOLLOWING LIST OF 19 COMPARABLES WHICH INCLUDED THREE COMPARABLES NAMELY BODHTREE CONSULTING LTD; LANCO GLOBAL SYSTEMS LTD. AND MINDTREE CONSULTING LTD., I NTRODUCED BY THE TAX PAYER:- S.NO. COMPANY NAME UNADJ USTE D OP/TC WORKING CAPITAL ADJUSTED OP / TC 1. AVANI CINCOM TECHNOLOGIES 21.65% 29.92% 2. BODHTREE CONSULTING LTD. 19.14% 23.89% 3. CELESTIAL BIOLABS 87.94% 86.71% 4. E - ZEST SOLUTIONS LTD. 28.95% 33.15% I.T.A .NO.-6485/DEL/2012 PAGE 7 OF 27 5. FLEXTRONICS(ARICENT) 8.07% 10.55% 6. IGATE GLOBAL SOLUTION LTD. 13.90% 16.39% 7. INFOSYS 40.41% 42.92% 8. KALS INFORMATION SYSTEMS LTD.(SEG) 41.94% 43.69% 9. LANCO GLOBAL SYSTEMS LTD. 26.64% 29.97% 10. MINDTREE CONSULTING LTD. 17.51% 20.65% 11. PERSISTENT SYSTEMS LTD. 27.23% 31.62% 12. QUINT EGRA SOLUTION LTD. 21.74% 23.03% 13. R SYSTEMS INTERNATIONAL(SEG) 15.30% 20.52% 14. RS. SOFTWARE (INDIA) LTD. 7.79% 7.86% 15. SASKEN COMMUNICATION TECHNOLOGIES LTD.(SEG) 13.44% 16.95% 16. SOFTSOL INDIA LTD. 42.15% 44.03% 17 . TATA ELXSI(SEG) 18.97% 22 .86% 18 . THIRDWARE SOLUTION LTD. 18.01% 19.96% 19 . WIPRO LTD.(SEG) 28.38% 33.67% AVERAGE 26.27% 29.39% 4.4. THE ASSESSEE CARRIED THE ISSUE BEFORE THE DISPUTE RESOLUTION PANEL (HEREINAFTER REFERRED TO AS DRP) WHO DIRECTED THE EXCLUSION O F CELESTIAL BIOLABS AND ALSO DIRECTED THAT THE OPERATING MARGIN OF SOFTSOL LIMITED AFTER EXCLUDING RENTAL INCOME AND CORRESPONDING RENTAL EXPENSES FOR THE SAID COMPANY BE REWORKED. THE DIRECTION OF THE DRP SUMMARIZED BY THE ASSESSEE IN THE SYNOPSIS FILE D IS REPRODUCED HEREUNDER:- (A) EXCLUDE ONE COMPARABLE (CELESTIAL BIOLABS) SIN CE IT FAILS THE TPOS OWN FILTER OF EMPLOYEE COST AND HAS DISSIMILAR FUNC TIONAL PROFILE. (B) RECTIFY THE OPERATING MARGIN OF SOFTSOL LIMITED AFTER EXCLUDING RENTAL INCOME AND CORRESPONDING RENTAL EXPENSE FOR THIS CO MPANYS MARGIN COMPUTATION. (C) INCLUDED COMPARABLE COMPANIES PASSING ALL THE F ILTERS APPLIED BY THE TPO INCLUDING THOSE WHERE THE DATA HAS BEEN OBTAINE D UNDER SECTION 133(6) OF THE INCOME TAX ACT, 1961 FOR THE PURPOSES OF COMPARABILITY ANALYSIS AND (D) EXCLUDE PROVISION FOR DOUBTFUL DEBTS AND FOREIG N EXCHANGE LOSS OR GAIN FROM MARK UP OF COMPARABLES AND THEN VERIFY AN D RECOMPUTED OPERATING PROFIT MARGINS ACCORDINGLY. I.T.A .NO.-6485/DEL/2012 PAGE 8 OF 27 4.5. IT HAS BEEN ARGUED THAT THE DIRECTIONS OF THE DRP WERE PARTIALLY CARRIED OUT BY THE TPO. THE FINAL LIST OF COMPARABLES WHICH WAS T AKEN INTO CONSIDERATION HAVING OP/TC MARGIN OF 25.34% WAS MADE THE BASIS OF THE AD DITION BY WAY OF ADJUSTMENT OF RS.1,58,42,960/-. THE SAME IS REPRODUCED HEREUNDER FOR READY REFERENCE:- S.NO. COMPANY NAME WORKING CAPITAL ADJUSTED OP / TC 1. AVANI CINCOM TECHNOLOGIES 32.70% 2. BODHTREE CONSULTING LTD. 25.67% 3. E - ZEST SOLUTIONS LTD. 34.01% 4. FLEXTRONICS(ARICENT) 10.35% 5. IGATE GLOBAL SOLUTION LTD. 16.46% 6. INFOSYS 43.40% 7. KALS INFORMATION SYSTEMS LTD.(SEG) 46.43% 8. LANCO GLOBAL SYSTEMS LTD. 31.18% 9. MINDTREE CONSULTING LTD. 20.65% 10. PERSISTENT SYSTEMS LTD. 25.25% 11. QUINTEGRA SOLUTION LTD. 22.67% 12. R SYSTEMS INTERNATIONAL(SEG) 17.69% 13. RS. SOFTW ARE (INDIA) LTD. 11.27% 14. SASKEN COMMUNICATION TECHNOLOGIES LTD.(SEG) 12.01% 15. SOFTSOL INDIA LTD. 25.54% 16. TATA ELXSI(SEG) 22.86% 17. THIRDWARE SOLUTION LTD. 24.15% 18. WIPRO LTD.(SEG) 33.77% ARITHMETIC MEAN 25.34% 5. THE LD. AR SOUGHT EXCLUSION OF AVANI CINCOM TECHNOLOGIES LTD. ON THE GROUND AS PER ITS WEBSITE DISPLAY THE COMPANY OWNS PRODUCTS LIKE DXCHANGE, TRAVEL SOLUTIONS, INSURANCE SOLUTION, CUSTOMER APPRECIATIO N AND RELATIONSHIP MANAGEMENT APPLICATION (CARMA), CONTENT MANAGEMENT SYSTEMS ETC . ON ITS WEBSITE, AVANI HAS PROVIDED YEAR WISE MILESTONES ACHIEVED WHERE IN IT IS STATED THAT PRODUCT DXCHANGE I.T.A .NO.-6485/DEL/2012 PAGE 9 OF 27 WAS INTRODUCED IN 2006 AND THE IMPROVED VERSION WAS AVAILABLE IN THE YEAR 2007. RELIANCE WAS PLACED ON THE EXTRACT ANNEXURED AS EXHI BIT I TO THE SUBMISSION FILED BEFORE THE TPO.(AT PAGES 604-605 OF THE PAPER BOOK). ACCO RDINGLY, IT WAS SUBMITTED THAT THIS COMPANY CANNOT BE ACCEPTED AS A COMPARABLE FOR BENC HMARKING ASSESSEES INTERNATIONAL TRANSACTIONS PERTAINING TO CONTRACT S OFTWARE DEVELOPMENT. RELIANCE IS PLACED UPON THE DECISION OF THE MUMBAI BENCH OF THE ITAT IN THE CASE OF TELECORDIA TECHNOLOGIES PVT.LTD. VS ACIT [2012] 22 TAXMANN.COM 96 (MUM) PLACED AT PAGES 53 TO 79 OF THE CASE LAW PAPER BOOK AND THE F OLLOWING EXTRACTS OF THE SAID DECISION WAS RELIED UPON:- 7.8. AVANI CINCOM TECHNOLGOIES LTD. (AVANI CINCOM ) HERE IN THIS CASE ALSO THE SEGMENTAL DETAILS OF OP ERATING INCOME OF IT SERVICES AND SALE OF SOFTWARE PRODUCTS HAVE NOT BEE N PROVIDED SO AS TO SEE WHETHER THE PROFIT RATIO OF THIS COMPANY CAN BE TAK EN INTO CONSIDERATION FOR COMPARING THE CASE THAT OF ASSESSEE. IN ABSENCE OF ANY KIND OF DETAILS PROVIDED BY THE TPO, WE ARE UNABLE TO PERSUADE OURS ELVES TO INCLUDE IT AS COMPARABLE PARTY. LEARNED CIT DR HAS PROVIDED A CO PY OF PROFIT LOSS ACCOUNT WHICH SHOWS THAT MAINLY ITS EARNING IS FROM SOFTWARE EXPORTS, HOWEVER, THE DETAILS OF PERCENTAGE OF EXPORT OF PRODUCTS OR SERVICES HAVE NOT BEEN GIVEN. WE, THEREFORE, REJECT THIS COMPANY ALSO FROM TAKI NG INTO CONSIDERATION FOR COMPARABILITY ANALYSIS. (EMPHASIS PROVIDED) 5.1. THE LD.CIT DR INVITING ATTENTION TO INTERNAL PAGE 62 TO 63 OF THE TPO SUBMITTED THAT INFORMATION U/S 133(6) HAS BEEN SOUGHT AND AS PER THE REPLY AVANI IS INTO PURE SOFTWARE DEVELOPMENT COMPANY AND FULFILLED ALL THE FILTERS. ACCORDINGLY IT WAS HIS PRAYER THAT THE COMPARABLE BE RETAINED. 5.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ORDER OF THE MUMBAI BENCH HEAVILY RELIED UPON BY THE I.T.A .NO.-6485/DEL/2012 PAGE 10 OF 27 ASSESSEE IN THE CASE OF TELECORDIA TECHNOLOGIES IND IA PVT. LTD (CITED SUPRA) PERTAINS TO 2007-08 AY WHEREIN ADMITTEDLY THE SEGMENTALS WERE N OT PROVIDED. ACCORDINGLY, HOW IT STILL IMPACTS THE CONCLUSION TO BE ARRIVED AT IN TH E PRESENT PROCEEDINGS HAS NOT BEEN ADDRESSED BY THE LD.AR. NO DOUBT IN THE FACTS OF T HE PRESENT CASE APART FROM THE FACT THAT SEGMENTAL WERE OBTAINED REFERENCE HAS ALSO BEE N MADE BY THE TPO TO HIS FINDINGS IN 2007-08 AY ALSO. HOWEVER, FACTS FOR THE YEAR UN DER CONSIDERATION HAVE ALSO BEEN SPECIFICALLY ADDRESSED. WE ALSO FIND THAT THE APPR OACH ADOPTED IN THE FIRST ROUND BY THE ITAT IN BLINDLY FOLLOWING ITS OWN DECISION QUA THIS COMPARABLE IN 2007-08 AY WHICH ORDER HAD BEEN UPHELD BY THE HONBLE HIGH COURT WAS FAULTED WITH BY THE JURISDICITONAL HIGH COURT PRESUMABLY FOR NOT ADDRESSING THE RELEVA NT FACTS. THUS, THE APPROACH OF BLINDLY FOLLOWING PRECEDENT WITHOUT REFERRING TO TH E FACTS ON RECORD ADMITTEDLY STANDS DEPRECATED BY THE JURISDICTIONAL HIGH COURT. IN TH E CIRCUMSTANCES THE EXERCISE OF RELYING ON PRECEDENCE WITHOUT DRAWING PARALLELS IS FOUND TO BE OF NO HELP. IN THE FACTS OF THE PRESENT CASE, INFORMATION U/S 133(6) AS PER RECORD HAS BEEN OBTAINED BY THE TPO. THE FACT THAT IT HAS BEEN EFFECTIVELY CONFRON TED TO THE TAX PAYER OR IS NOT COMING OUT OF THE ORDER. ACCORDINGLY, IN THESE PECULIAR F ACTS AND CIRCUMSTANCES WE DEEM IT APPROPRIATE TO RESTORE THE ISSUE BACK TO THE TPO TO CONFRONT THE INFORMATION TO THE ASSESSEE OBTAINED U/S 133(6) AND RELIED UPON AND TH EREAFTER PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW. 5.3. THE ISSUE IS WELL SETTLED THAT SIMPLY BECAUSE A CO MPARABLE HAS BEEN INCLUDED OR EXCLUDED IN SOME YEAR THAT ACTION OR INACTION BY IT SELF IN TRANSFER PRICING ISSUES ON COMPARABILITY CANNOT CONSTITUTE A PRECEDENT TO BE B LINDLY FOLLOWED AD INFINITUM . I.T.A .NO.-6485/DEL/2012 PAGE 11 OF 27 WHETHER A PARTICULAR COMPANY IS A COMPARABLE OR NOT IS AN EXERCISE WHICH HAS TO BE CARRIED OUT EVERY YEAR IN THE CASE OF AN ASSESSEE C ONSIDERING THE FACTS OF THAT SPECIFIC YEAR AND NOT BLINDLY FOLLOWING THE PRECEDENT WHICH HAS BEEN LAID DOWN IN EARLIER OR SUBSEQUENT YEAR. A COMPARABLE IS A COMPARABLE ON F ACTS AND NOT BECAUSE A PRECEDENT MAKES IT SO. NEITHER CAN THE TAX PAYER INSIST THAT A COMPARABLE BE INCLUDED NOR CAN IT BE INSISTED THAT IT BE EXCLUDED ONLY ON THE GROUND OF IT HAVING BEEN INCLUDED OR EXCLUDED IN SOME OTHER A PREVIOUS ASSESSMENT YEAR. IT GOES WITHOUT SAYING THAT WHAT APPLIES TO THE TAX PAYER EQUALLY APPLIES TO THE REV ENUE. A CHALLENGE POSED BY EITHER OF THE PARTIES TO INCLUSION OR EXCLUSION OF A COMPARAB LE HAS TO BE NECESSARILY JUSTIFIED ON THE BASIS OF FACTS AVAILABLE ON RECORD AND NOT ON A N ISSUE WHICH WAS NEITHER ARGUED OR CONSIDERED OR ON FACTS NOT REFERRED OR AVAILABLE. THE PRESENT CASE IS A FINE EXAMPLE OF THE HONBLE HIGH COURT OF NOT APPROVING THE PRACTIC E OF FOLLOWING PRECEDENT QUA THESE ISSUES AS IN CLEAR UNAMBIGUOUS TERMS THE APPROACH H AS BEEN DEPRECATED AS THE HONBLE HIGH COURT HAS NOT EVEN APPROVED THE BLIND ACCEPTAN CE/REJECTION OF COMPARABLES FOLLOWING THE PRECEDENT AVAILABLE IN ONES OWN CASE RELYING UPON THE SETTLED POSITION OF EARLIER YEARS WHICH STOOD UPHELD BY THE HONBLE HIG H COURT ITSELF. THUS IN VIEW OF THE DISCUSSION ON MATERIAL FACTS NAMELY WHETHER INFORMA TION SOUGHT U/S 133(6) AND RELIED UPON WAS CONFRONTED TO THE ASSESSEE OR NOT THE ISSU E IS ACCORDINGLY RESTORED TO THE TPO IN ORDER TO AFFORD AN OPPORTUNITY TO THE TAXPAYER T O ADDRESS THE SAME. 6. ADDRESSING E-ZEST SOLUTIONS LTD. IT WAS SUBMITTED ITS EXCLUSION IS SOUGHT ON THE GROUND THAT IT IS FUNCTIONALLY DIFFERENT AS IT HAS DIVERSIFIED BUSINESS AS PER ITS WEBSITE OF E-ZEST SOLUTIONS (SOURCE: HTTP://WWW.E-ZEST.NET ). IT WAS SUBMITTED THAT THIS I.T.A .NO.-6485/DEL/2012 PAGE 12 OF 27 COMPANY PROVIDED DIVERSIFIED SERVICES SUCH AS PRODU CT ENGINEERING INCLUDING DESIGN AND DEVELOPMENT, PRODUCT MODERNIZATION, SOFTWARE PRODUC T TESTING, ETC; IT SERVICES, CONSULTING; CONTACT CENTER SERVICES AND IT ENABLED SERVICES. RELIANCE WAS ALSO PLACED UPON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUN AL IN THE CASE OF TELECORDIA TECHNOLOGIES INDIA PRIVATE LIMITED (CITED SUPRA). 6.1. THE LD. CIT DR OPPOSED THE EXCLUSION OF E-ZEST SOLU TIONS RELYING UPON THE ORDER DATED 11.02.2016 IN HEADSTRONG SERVICES INDIA PRIVATE LIMITED VS DCIT ( 2016) 66 TAXMANN.COM 185 (DELHI TRIB). IT WAS HIS ARGUMENT THAT THE SAID COMPANY WAS ENGAGED IN PRODUCT ENGINEERING SERVICES AND AS PER RECORD AND FINDING OF THE DELHI BENCH OF THE TRIBUNAL APPLICABLE FOR THE VERY SAME ASSESSMENT YEAR AS IN THE PRESENT CASE NAMELY 2008-09 AY WHEREIN CONSIDERING THE FAC TS FOR THE YEAR UNDER CONSIDERATION IT HAS BEEN HELD THAT THERE WAS NO INVENTORY WITH T HE COMPANY AS IT WAS ENGAGED IN SOFTWARE DEVELOPMENT ONLY. THE ORDER IN HEADSTRON G SERVICES INDIA PVT. LTD. (CITED SUPRA) IT WAS SUBMITTED WAS LATEST IN POINT OF TIME AS IT IS DATED 11.02.2016. 6.2. WE HAVE HEARD THE SUBMISSIONS AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. WE NOTE THAT THE FINDING OF FACT ON RECORD IN THE CASE OF HEADSTRONG SERVICES INDIA PVT. LTD. (CITED SUPRA) THAT E-ZEST SOLUTIONS HAD NO INV ENTORY HAS NOT BEEN REBUTTED BY THE LD.AR IN THE FACTS OF THE PRESENT CASE. A PERUSAL OF THE TPOS ORDER PAGE 63 SHOWS THAT HEREIN ALSO THE TPO HAS OBTAINED INFORMATION UNDER SECTION 133(6) AND AS PER THE REPLY RECEIVED THE COMPANY IS STATED TO BE ENGAGED IN SOF TWARE DEVELOPMENT SERVICES. THE OBJECTIONS OF THE ASSESSEE TO THE INFORMATION U/S 133 (6) HAS ALREADY BEEN DEALT WITH BY THE TPO AT PAGES 64 AND 65. NO DISTINGUISHING F ACTS OR CIRCUMSTANCES CONTRARY TO I.T.A .NO.-6485/DEL/2012 PAGE 13 OF 27 THE ORDER OF THE CO-ORDINATE BENCH PERTAINING TO TH E SAME ASSESSMENT YEAR ON SIMILAR FACTS AND CIRCUMSTANCES NAMELY HEADSTRONG SERVICES INDIA PVT. LTD. (CITED SUPRA) HAS BEEN BROUGHT TO OUR NOTICE BY THE LD.AR. ACCORDING LY IN THE FACTS AS THEY STAND, WE FIND NO GOOD REASON TO VARY THE CONCLUSION ARRIVED AT WHICH WE ALSO FIND IS SUPPORTED BY THE ORDER OF THE CO-ORDINATE BENCH. THE PRAYER OF THE ASSESSEE FOR EXCLUSION OF THE SAID COMPARABLE IS REJECTED. THE RELEVANT FINDING O F THE CO-ORDINATE BENCH IS REPRODUCED HEREUNDER:- (III) E-ZEST SOLUTIONS 16.1. THE TPO INCLUDED THIS COMPANY IN THE LIST OF COMPARABLES AFTER COLLECTING INFORMATION U/S 133(6) WHICH DISCLOSED T HAT IT WAS ENGAGED IN RENDERING SOFTWARE DEVELOPMENT SERVICES ONLY. THE A SSESSEE'S OBJECTIONS ABOUT THE UNRELIABLE INFORMATION AND NON-AVAILABILI TY OF INFORMATION IN PUBLIC DOMAIN, WERE REJECTED BY THE TPO. 16.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE ANNUAL REPORT OF THIS COMPANY, WHICH IS AVAILABLE ON PAGE 1 ONWARDS OF THE PAPER BOOK. PAGE 6 OF THE ANNUAL REPORT, BEING AN ANNEXURE TO THE AU DITOR'S REPORT, CLEARLY INDICATES UNDER (II) THAT: 'THERE IS NO INVENTORY W ITH THE COMPANY SINCE IT IS ENGAGED IN SOFTWARE DEVELOPMENT.' FROM THE BALANCE SHEET OF THIS COMPANY, IT IS NOTICEABLE THAT THERE IS NO CLOSING STOCK OF ANY SOFTWARE PRODUCTS. SINCE THE ASSESSEE IS ALSO ENGAGED IN RENDERING SOFTWARE DEVELOPMENT SERVICES AND THIS COMPANY IS ALSO DOING THE SAME BUSINESS, WE AR E OF THE CONSIDERED OPINION THAT THIS COMPANY WAS RIGHTLY INCLUDED IN T HE LIST OF COMPARABLES. 16.3. THE LD. AR'S CONTENTION THIS COMPANY, BEING I N KPO BUSINESS AS AGAINST THE ASSESSEE'S BPO BUSINESS, IS UNSUBSTANTIATED. NE ITHER IT HAS BEEN SHOWN THAT THE ASSESSEE IS RENDERING BPO SERVICES NOR THA T E-ZEST IS PROVIDING KPO SERVICES. WE, THEREFORE, APPROVE THE VIEW TAKEN BY THE AUTHORITIES BELOW ON THIS ISSUE. 7. EXCLUSION OF INFOSYS TECHNOLOGIES LTD WAS SOUGHT BY THE LD.AR NOT ONLY ON THE GROUNDS THAT ON IDENTICAL FACTS AND CIRCUMSTANC ES, IT HAD BEEN DIRECTED TO BE EXCLUDED IN THE CASE OF THE ASSESSEE ITSELF IN 200 6-07 ASSESSMENT YEAR WHICH DECISION HAD BEEN UPHELD BY THE HON'BLE HIGH COURT BUT WAS A LSO SUPPORTED ON THE BASIS OF TELECORDIA TECHNOLOGIES INDIA PRIVATE LIMITED. (CIT ED SUPRA) IT WAS ARGUED THAT I.T.A .NO.-6485/DEL/2012 PAGE 14 OF 27 IT OPERATED AS A FULL-FLEDGED RISK TAKING ENTERPRI SE HAVING DIVERSIFIED BUSINESSES IN SOFTWARE PRODUCTS, CONSULTING APPLICATION, DESIGN D EVELOPMENT ETC BUT ALSO ON THE GROUNDS THAT IT DEVELOPED AND OWNED PROPRIETARY PRO DUCTS LIKE FINACLE WHICH WAS ITS FLAGSHIP BANKING PRODUCT AND SUBSTANTIAL PORTION OF ITS REVENUES IT WAS STATED WERE REALIZED FROM ITS SALE AND THE EXPENDITURE OF RS. 7 30 CRORES ON ADVERTISEMENT, SALES, PROMOTION AND BRAND BUILDING IT WAS SUBMITTED WOULD FURTHER DEMONSTRATE THAT IT HAD A BRAND VALUE. 7.1. THE LD. CIT DR STRONGLY OPPOSED THE REQUEST OF THE LD. AR ON THE GROUNDS THAT THE REVENUE FROM SOFTWARE PRODUCTS CONSTITUTES ONLY 3.82% OF THE OPERATING REVENUE AND THUS MORE THAN 95% OF ITS REVENUES WERE STATED TO BE FROM SOFTWARE DEVELOPMENT SERVICES AND THUS IT FULLY QUALIFIED THE TPOS FILT ER OF MORE THAN 75% REVENUES FROM SOFTWARE DEVELOPMENT SERVICES. IT WAS HIS SUBMISSI ON THAT THE FILTERS APPLIED BY THE TPO AND UPHELD BY THE DRP HAVE NOT BEEN CHALLENGED BY THE ASSESSEE IN THE PRESENT PROCEEDINGS. IN THE FACTS OF THE PRESENT CASE IT W AS SUBMITTED THESE PECULIAR FACTS HAVE BEEN BROUGHT OUT BY THE TPO IN THE ORDER AND IN TH E FACTS AS CONSIDERED IN THE PRECEDENT THESE PECULIAR FACTS EVIDENTLY ARE NOT AV AILABLE. IT WAS HIS ARGUMENT THAT EVEN CONSIDERING THE ARGUMENT OF THE ASSESSEE THAT IT PROVIDED END TO END SOLUTION THE TPO HAS GIVEN A FINDING THAT IN THE YEAR UNDER CONSIDERATION MORE THAN 90% OF ITS REVENUES CAME FROM MAINTENANCE OR ENHANCEMENT OF TH E SOFTWARE AND NOT FROM PROVIDING END TO END SOLUTIONS. ACCORDINGLY, IN TH E FACTS OF THE PRESENT CASE INFOSYS LTD. IT WAS SUBMITTED NEEDS TO BE RETAINED. IT WAS ALSO SUBMITTED BY HIM THAT THE APPROACH OF BLINDLY RELYING UPON PRECEDENT HAS NOT BEEN UPHELD BY THE HONBLE HIGH I.T.A .NO.-6485/DEL/2012 PAGE 15 OF 27 COURT IN THE FACTS OF THE PRESENT CASE ITSELF. ATT ENTION WAS INVITED TO THE FACT THAT THE APPROACH OF THE ITAT IN EXCLUDING THE SAID COMPARAB LE RELYING UPON THE VIEW TAKEN BY THE ITAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YE AR WHICH VIEW HAD BEEN UPHELD BY THE HONBLE HIGH COURT ITSELF THE HONBLE HIGH COUR T STILL CONSIDERING THE FACTS REMANDED THE ISSUES BACK FOR FRESH DETERMINATION THEREBY MAK ING IT CLEAR THAT INSTEAD OF FOLLOWING PRECEDENCE SPECIFIC FACTS NEED TO BE ADDRESSED FOR WHICH PURPOSED THE ISSUES HAD BEEN REMANDED AS THE APPROACH OF THE ITAT, FOLLOWING THE PRECEDENT AVAILABLE IN ASSESSEES CASE HAS NOT BEEN UPHELD. ACCORDINGLY IT WAS HIS SU BMISSION THAT THE COMPARABLE SHOULD BE RETAINED. 7.2. IN REPLY NO ARGUMENTS CONTRARY TO THE FACTUAL SUBM ISSIONS MADE BY THE LD.DR WERE ADVANCED BY THE LD.AR. 7.3. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD WE FIND THAT IN THE PECULIAR FACTS AND CIRCUMSTANCE S OF THE CASE WHERE THE HONBLE HIGH COURT HAS NOT APPROVED OF THE APPROACH OF THE ITAT IN RELYING UPON THE PRECEDENT AVAILABLE IN ASSESSEES OWN CASE FOR THE IMMEDIATEL Y PRECEDING ASSESSMENT YEAR WHICH PRECEDENT STOOD APPROVED BY THE HONBLE HIGH COURT ITSELF, WE FIND THAT THE PRAYER OF THE LD. DR THAT DECISION BE MADE FIRST ON FACTS O N RECORD AND THEREAFTER PRECEDENCE BE CONSIDERED IS NOT ONLY A SETTLED LEGAL POSITION BUT IN THE FACTS OF THE PRESENT CASE FOLLOWING THIS SETTLED POSITION THE ISSUE HAS BEEN REMANDED DESPITE THE FACT THAT THE CO- ORDINATE BENCH HAD FOLLOWED THE PRECEDENCE IN ASSES SEES OWN CASE. CONSIDERING THE FACTS AND THE ARGUMENT, WE FIND THAT IN THE FACE OF THE FINDING THAT THE REVENUE FROM SOFTWARE PRODUCTS CONSTITUTES ONLY 3.82% AND ABOUT 96% OF THE REVENUES ARE FROM I.T.A .NO.-6485/DEL/2012 PAGE 16 OF 27 SOFTWARE DEVELOPMENT SERVICES AND 90% OF THE REVENU E COME FROM MAINTENANCE OR ENHANCEMENT OF THE SOFTWARE AND NOT FROM END TO EN D SOLUTIONS WHICH FINDING ON FACTS REMAIN UNREBUTTED ON RECORD THE PRAYER FOR RE JECTION ON THIS GROUND IS NOT MAINTAINABLE. HOWEVER, CONSIDERING THE FACT THAT T HOUGH THE FILTER OF 3% HAS BEEN APPLIED ON ADVERTISING, MARKETING & DISTRIBUTION EX PENSES R&D COSTS HAS NOT BEEN CROSSED THE IMPACT OF BRAND VALUE ON PRICING MAY BE DEMONSTRATED BY THE ASSESSEE AS IT HAS A POTENTIAL OF IMPACTING NET PROFITABILITY. WE ARE CONSCIOUS THAT THERE ARE PRECEDENTS WHEREIN BRAND VALUE HAS BEEN HELD TO BE IMPACTING THE NET PROFITABILITY. THUS THE ENQUIRY IS RELEVANT. ACCORDINGLY WHETHER ON FACTS THERE IS AN IMPACT ON NET PROFITABILITY OF THE COMPARABLE ON ACCOUNT OF ITS B RAND IS DIRECTED TO BE CONSIDERED. THE ASSESSEE IS DIRECTED TO DEMONSTRATE ITS CLAIM BEFOR E THE TPO. 8. THE EXCLUSION OF WIPRO LTD WAS SOUGHT ON THE GROUND THAT IT NOT ONLY OPERATED AS A FULL-FLEDGED RISK TAKING ENTERPRISE BUT ALSO H AD DIVERSIFIED SERVICES WHICH INCLUDED CONSULTING PACKAGE IMPLEMENTATION, APPLICATION DEVE LOPMENT AND MAINTENANCE, TESTING SERVICES, TECHNOLOGY INFRASTRUCTURE, PRODUCT, ENGIN EERING, PROCESS OUTSOURCING THE IT SERVICES SEGMENT CONSISTS OF SOFTWARE DEVELOPMENT S ERVICES AND ITES. OBJECTION IS ALSO ON THE GROUND THAT IT OWNS BRANDS SUBSTANTIAL PATEN TS TRADEMARKS AND RIGHTS TO THE TUNE OF RS. 175 CRORES. APART FROM THAT SUBSTANTIAL EXP ENDITURE ON RESEARCH AND DEVELOPMENT AS COMPARED TO NIL EXPENDITURE BY THE T AXPAYER FURTHER MADE THE SAID THE COMPANY IT WAS SUBMITTED AN INCOMPARABLE TO THE ASS ESSEE. ACCORDINGLY, RELIANCE WAS PLACED UPON THE DECISION OF THE ITAT UPHELD BY THE HONBLE HIGH COURT IN ASSESSEES OWN CASE AND TELECORDIA TECHNOLOGIES INDIA PRIVATE LIMITED.(CITE D SUPRA). THE I.T.A .NO.-6485/DEL/2012 PAGE 17 OF 27 FOLLOWING EXTRACT FROM THE CASE OF THE SAID DECISIO N WAS HEAVILY RELIED UPON TO SUBMIT THAT THE SAID COMPARABLE HAS TO BE EXCLUDED:- 7.5. WIPRO LTD.-IT SERVICES SEGMENT (WIPRO): THIS COMPANY IS ALSO A GLOBAL IT COMPANY HAVING VA RIETIES OF SERVICE AND PRODUCTS AND LOOKING TO THE MAGNITUDE O F ITS OPERATIONS, SALES AND EXPENSES, THE SAME CANNOT BE TAKEN INTO C ONSIDERATION FOR COMPARABILITY ANALYSIS. MOREOVER, 67% OF ITS S ALES RELATES TO ITS PRODUCT WHICH ARE SOLD ON PREMIUM RESULTING INTO HI GHER PROFITABILITY, THEREFORE, CANNOT BE COMPARED WITH T HE ASSESSEE COMPANY AT ALL. THERE ARE SEVERAL JUDGEMENTS OF ITAT WHICH HAVE B EEN REFERRED IN PARA 6.5 ABOVE, THAT WIPRO CANNOT BE TA KEN AS COMPARABLE CASE FOR COMPARABLE CASE WITH THE COMPANY LIKE ASSESSEE. IN VIEW OF THESE FACTS AND THE REASONING GIVEN IN THE CASE OF INFOSYS, WE HOLD THAT WIPRO ALSO CANNOT BE CONSIDERED AS A COMPARABILITY ANALYSIS, H ENCE, WOULD NOT BE INCLUDED IN THE LIST OF THE COMPARABLE ENTITIES AS IDENTIFIED BY THE TPO. (EMPHASIS PROVIDED) 8.1. THE LD. CIT DR RELYING UPON INTERNAL PAGE 80 TO 91 OF THE TPOS ORDER SUBMITTED THAT THE REASONS BROUGHT OUT ON RECORD BY THE TPO F OR RETAINING THE COMPARABLE HAVE NOT BEEN ASSAILED BY THE ASSESSEE. IN THE FACTS OF THE PRESENT CASE IT WAS HIS SUBMISSION THAT INFORMATION UNDER SECTION 133 (6) H AS BEEN OBTAINED BY THE TPO AND SEGMENTALS HAVE BEEN APPLIED. IT WAS SUBMITTED THA T THE ASSESSEE IS RELYING UPON THE CONSOLIDATED BALANCE SHEETS AND THE REVENUE IS RELY ING ON STANDALONE FINANCIAL DATA WHICH HAS BEEN CONFRONTED TO THE ASSESSEE AND ADDRE SSED. RELYING ON PRECEDENT WHERE THESE FACTS ARE NOT DISCUSSED IT WAS SUBMITTE D WOULD BE OF NO HELP. 8.2. WE FIND CONSIDERING THE FACTS THAT THE LD. AR DID NOT ADVANCE ANY ARGUMENT ASSAILING THE FACT THAT THE SEGMENTALS HAVE BEEN TA KEN INTO CONSIDERATION AND THE INFORMATION OBTAINED UNDER SECTION 133 (6) HAS BEEN CONFRONTED TO THE ASSESSEE WHICH HAS BEEN RELIED UPON BY THE TPO. THE RESULTS TAKEN INTO CONSIDERATION BY THE REVENUE EVIDENTLY WERE NOT THE CONSOLIDATED RESULTS AS CANV ASSED BY THE ASSESSEE BUT THE I.T.A .NO.-6485/DEL/2012 PAGE 18 OF 27 STANDALONE FINANCIAL DATA QUA THE SEGMENT. HOWEVER, WE FIND THE OWNERSHIP OF BRANDS HAS BEEN ARGUED, THE IMPACT ON PRICING OF THE BRAND VALUE OF THE SAID COMPANY HAS NOT BEEN EXAMINED, OWNERSHIP OF BRANDS AND PATENTS, TRA DEMARKS ETC. IS AN ADMITTED FACT. THE ASSESSEE IS DIRECTED TO PLACE ON RECORD FACTS D EMONSTRATING THAT THE OWNERSHIP OF BRANDS ETC. HAS IMPACTED THE PRICING TO THE EXTENT THAT THE NET PROFITABILITY OF THE COMPARABLE ITSELF IS IMPACTED. THE PRECEDENT WHERE SEGMENTAL WERE NOT AVAILABLE AND STANDALONE FINANCIAL DATA WAS NOT CONFRONTED WOULD BE OF NO HELP. THE ISSUE ACCORDINGLY IS RESTORED FOR CARRYING OUT THIS NECES SARY EXERCISE. 9. THE EXCLUSION OF KALS INFORMATION SYSTEM LTD. (SEG ) LD.AR SUBMITTED WAS SOUGHT ON THE GROUND THAT IT WAS ENGAGED IN THE BUS INESS OF SOFTWARE SERVICES AND SOFTWARE PRODUCTS AND THE WEBSITE DISPLAY SHOWED TH AT IT HAD DEVELOPED PRODUCTS. RELIANCE WAS ALSO PLACED UPON THE SUBMISSIONS MADE IN THE SYNOPSIS ADDRESSING THAT THERE ARE CERTAIN MATHEMATICAL ERRORS IN THE ANNUAL REPORT OF THIS COMPANY IN REGARDS TO THE COMPUTATION OF ITS MARGINS. 9.1. THE LD. CIT DR RELYING ON ARGUMENTS SIMILAR TO WHA T WAS ADVANCED IN THE CASE OF WIPRO TECHNOLOGY LTD. SUBMITTED THAT THE SAID CO MPARABLE SHOULD BE RETAINED AS INFORMATION HAD BEEN SOUGHT UNDER SECTION 133 (6) A ND SEGMENTAL DETAILS HAVE BEEN TAKEN INTO CONSIDERATION. 9.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT NO DOUBT THE TPO IN HIS ORDER AT SPECIFIC PAGES 68 TO 70 DOES MAKE REFERENCE TO INFORMATION HAVING BEEN SOUGHT UN DER SECTION 133 (6) HOWEVER THE FACT THAT IT WAS CONFRONTED TO THE ASSESSEE AND IT S REPLY WAS TAKEN INTO CONSIDERATION IS I.T.A .NO.-6485/DEL/2012 PAGE 19 OF 27 NOT EVIDENT FROM THE RECORD. THE ARGUMENT OF THE AS SESSEE THAT RELIANCE HAS BEEN PLACED ON EVIDENCE WHICH IS NOT AVAILABLE IN PUBLIC DOMAIN IS OF NO HELP. THE LAW IS WELL-SETTLED AND NEEDS NO PRECEDENCE TO CITE THAT T HE TPO HAS THE POWER U/S 92C(3) TO USE INFORMATION IN HIS POSSESSION AND THE POWER TO GATHER MATERIAL UNDER THE SAID SECTION WHICH IS AKIN TO THE PROVISIONS SIMILAR TO THE POWER VESTED WITH THE AO IN THE PROCEEDINGS U/S 143(3). SUB-SECTION (7) OF SECTION 92CA EMPOWERS THE TPO TO UTILIZE THE SAME UNDER SECTION 133(6)/131 AND ANY FALSITY I N THE INFORMATION PROVIDED IS LIABLE FOR PENDING ACTION. THUS THE PROVISION ENABLES THE TPO TO CALL FOR INFORMATION U/S 133(6). THE IMPEDIMENT TO USE THE SAME IS ONLY IF IT IS NOT CONFRONTED TO THE ASSESSEE. 9.3. IN THE FACTS OF THE PRESENT CASE, THE CONSISTENT A RGUMENT OF THE ASSESSEE HAS BEEN THAT SEGMENTAL INFORMATION IS NOT AVAILABLE IN THE PUBLIC DOMAIN THUS IT APPEARS IT HAS BEEN CONFRONTED. THE TPO HAS ALSO GIVEN THE FI NDING THAT THE SOFTWARE PRODUCT AND TRAINING CONSTITUTES 4.24% OF ITS REVENUE AND CROSS ES THE 75% FILTER. HOWEVER, WHETHER THE STANDALONE FINANCIAL DATA WAS CONSIDERE D AND CONFRONTED TO THE ASSESSEE OR NOT IS NOT COMING OUT FROM THE RECORD. ACCORDIN GLY IT CANNOT BE SAID THAT THE INFORMATION WAS EFFECTIVELY COMMUNICATED. IT IS FU RTHER SEEN THAT MATHEMATICAL ERRORS IN CALCULATING THE MARGINS HAS ALSO BEEN AGITATED O N BEHALF OF THE ASSESSEE. ACCORDINGLY IN VIEW OF THE PROCEDURAL DEFICIENCY AND THE CALCUL ATION ERRORS AGITATED, WE DEEM IT APPROPRIATE TO RESTORE THE ISSUE BACK TO THE FILE O F THE TPO TO CONFRONT THE SAME TO THE ASSESSEE. 10. EXCLUSION OF SOFTSOL INDIA LTD WAS SOUGHT ON THE GROUND THAT IT OPERATES IN A NICHE MARKET PROVIDING HIGH-END SERVICES AS COMPARE D TO ROUTINE LOW-END IT AND I.T.A .NO.-6485/DEL/2012 PAGE 20 OF 27 RELATED SERVICES PROVIDED BY THE ASSESSEE. IT WAS A LSO THE SUBMISSION OF THE LD.AR THAT A PERUSAL OF THE WEBSITE DISPLAYED THAT THE SAID CO MPANY HAS DEVELOPED/OFFERED TO DEVELOP PRODUCTS SUCH AS FULL FEATURED CASE MANAGEM ENT SYSTEM, CORPORATE INVESTIGATIONS, AUTOMATION SOLUTIONS ETC. AND SEGME NTAL DETAILS WERE NOT AVAILABLE. IT WAS ALSO SUBMITTED THAT OVER THE YEARS, IT HAD HIGH VOLATILITY IN ITS MARGINS. THE FOLLOWING CHART WAS RELIED UPON:- FY 2004 - 05 FY 2005 - 06 FY 2006 - 07 FY 2007 - 08 FY 2008 - 09 FY 2009 - 10 2.12% 48.62% 113.48% 25.58% 138.30% 101.73% 10.1. IT WAS ALSO CANVASSED THAT THERE IS AN ERROR IN THE COMPUTATION OF THE MARGINS FOR WHICH PURPOSES THE DRP HAD GIVEN A DIRECTION TO THE TPO TO ADDRESS THE SAME. THE SAID DIRECTIONS IT WAS SUBMITTED HAS NOT BEEN CARRI ED OUT. 10.2. THE LD. CIT DR AGREED THAT THE ISSUE SHOULD BE REST ORED BACK IN TERMS OF THE DIRECTIONS OF THE DRP. WE FIND THAT THE DRP DIRECT ED THE TPO TO EXCLUDE RENTAL INCOME AND CORRESPONDING RENTAL EXPENSES FROM ITS MARGINS. THE HIGH VOLATILITY IN THE MARGINS ALSO MAY BE EXAMINED. THE SEGMENTAL OBTAINED MAY B E CONFRONTED TO THE ASSESSEE. ACCORDINGLY IN THE LIGHT OF THE SUBMISSIONS OF THE PARTIES BEFORE THE BENCH THE ISSUE IS RESTORED BACK TO THE TPO TO ADDRESS THE COMPUTATION AL ERROR AND ALSO THE REASONS FOR HIGH VOLATILITY IN THE MARGINS OF THE SAID COMPARAB LE ETC. 11. EXCLUSION OF I GATE GLOBAL SOLUTIONS LTD. IT WAS SUBMITTED IS SOUGHT ON THE GROUNDS THAT IT HAD DIVERSIFIED BUSINESS OPERATIONS ON WHICH GROUND IT HAD BEEN REJECTED IN THE EARLIER YEAR BY THE ITAT. RELIANCE WAS ALSO PLACED ON THE CASE OF I.T.A .NO.-6485/DEL/2012 PAGE 21 OF 27 TELECORDIA TECHNOLOGIES INDIA PRIVATE LIMITED WHEREIN THE SAID COMPARABLE HAD BEEN REJECTED. 11.1. THE LD. CIT DR INVITING ATTENTION TO INTERNAL PAGE S 65 OF THE TPOS ORDER SUBMITTED THAT HEREIN ALSO INFORMATION HAD BEEN SOU GHT UNDER SECTION 133 (6) WHICH WOULD SHOW THAT 100% INCOME OF THE SAID COMPANY HA D BEEN RETURNED ONLY FROM SOFTWARE DEVELOPMENT SEGMENT. IT WAS HIS ARGUMENT THAT SINCE SEGMENTALS HAVE BEEN TAKEN INTO CONSIDERATION AND IT QUALIFIED ALL THE F ILTERS APPLIED AND THESE HAVE NOT BEEN OBJECTED TO BEFORE THE ITAT. ACCORDINGLY IT WAS CO RRECTLY INCLUDED. 11.2. WE HAVE FURTHER HEARD THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD AND CONSIDERING THE PECULIAR FACTS AND CI RCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT IN THE FACTS OF THE PRESENT CASE SEGM ENTAL HAVE BEEN UTILIZED HOWEVER WHETHER THESE WERE CONFRONTED TO THE ASSESSEE OR N OT IS NOT COMING OUT FROM THE RECORD ESPECIALLY IN THE FACE OF THE ASSESSEES OBJ ECTION THAT THE COMPANY WAS ENGAGED IN DIVERSIFIED ACTIVITIES WHICH CASTS A SERIOUS DOU BT ON WHETHER SEGMENTALS WERE CONFRONTED. ACCORDINGLY, WE DEEM IT APPROPRIATE TO RESTORE THE ISSUE BACK TO THE TPO TO ADDRESS THIS ASPECT. THE RELIANCE PLACED ON DEC ISIONS WHERE SEGMENTAL HAVE BEEN CONSIDERED IS NOT OF MUCH RELEVANCE. 12. EXCLUSION OF FLEXTRONICS SOFTWARE SYSTEM LTD WAS SOUGHT ON THE GROUND THAT IT WAS FUNCTIONALLY DIFFERENT WHICH FACT WAS STATED TO BE EVIDENT FROM ITS ANNUAL REPORT AS THE COMPANY WAS INVOLVED IN PROVISION OF SOFTWAR E SERVICES AND SALE OF SOFTWARE PRODUCTS. APART FROM THAT THE COMPANY HAD A RESEARC H AND DESIGN SALES RATIO OF 5.8%. ACCORDINGLY RELYING UPON THE PRECEDENT AS LAID DOWN IN ASSESSEES OWN CASE AND IN THE I.T.A .NO.-6485/DEL/2012 PAGE 22 OF 27 CASE OF TELECORDIA TECHNOLOGIES INDIA PRIVATE LIMITED (CITE D SUPRA) IT WAS PLEADED THAT THE SAID COMPARABLE COMPANY DESERVES T O BE EXCLUDED. 12.1. THE LD.CIT DR OBJECTED TO THE ASSESSEES PRAYER ST ATING THAT ALL FILTERS APPLIED WERE QUALIFIED AND THEY HAVE NOT BEEN OBJECTED TO. THE PRODUCT REVENUE IT WAS SUBMITTED IS ONLY 12.31% AND HENCE 75% FILTER IS E XCEEDED AS ITS REVENUE FROM SERVICES WAS 87.69%. MOREOVER, PRODUCT AND SERVICE S SEGMENT HAS BEEN CONSIDERED AS COMPARABLE. RELYING ON CHRYS CAPITAL INVESTMENT ADVISORS P. LTD. VS DCIT [2015] 232 TAXMAN 20 (DELHI) IT WAS SUBMITTED THAT PRESUMPTION OF HIGH PROFIT ON HIGH TURNOVER CANNOT BE A CRITERIA TO EXCLUDE AN OT HERWISE COMPARABLE COMPANY. 12.2. HAVING HEARD THE SUBMISSIONS AND PERUSED THE RECORD , WE FIND THAT IN THE ABSENCE OF ANY ARGUMENT REBUTTING THAT SEGMENTAL WE RE CONFRONTED AND ALSO THE FACT THAT THE REVENUE FROM SERVICES 87.69% FAR IN EXCESS OF THE BAR OF 75% WHICH ALSO REMAINS UNREBUTTED. WE FIND NO GOOD REASON TO INTE RFERE WITH THE FINDING. NO PRECEDENT CONTROVERTING THESE MATERIAL FACTS HAS BE EN CITED BEFORE US TO CONSIDER A CONTRARY VIEW. ACCORDINGLY IN VIEW OF THE SAME, TH E COMPARABLE IS DIRECTED TO BE RETAINED. 13. EXCLUSION OF PERSISTENT SYSTEMS LTD WAS SOUGHT ON THE GROUNDS THAT THE SAID COMPANY DERIVED ITS INCOME FROM SALE OF SOFTWARE SE RVICES AS WELL AS PRODUCTS. RELYING UPON THE INFORMATION SOUGHT BY THE TPO UNDER SECTIO N 133 (6) OF THE ACT, IT WAS SUBMITTED THAT PERSISTENT SYSTEMS LTD. IS ALSO ENGA GED IN DEVELOPMENT OF SOFTWARE PRODUCTS. FURTHER RELYING UPON THE INFORMATION AVAI LABLE ON THE WEB, IT WAS SUBMITTED THAT THE SAID COMPANY WAS THE OWNER OF VARIOUS PROD UCTS LIKE PAXPRO, CHEMLMS, CLAP, I.T.A .NO.-6485/DEL/2012 PAGE 23 OF 27 EMEE ETC. JUDICIAL PRECEDENT AS AVAILABLE IN ASSES SEES OWN CASE AND IN THE CASE OF TELECORDIA TECHNOLOGIES INDIA PRIVATE LIMITED WAS HEAVILY RELIED UPON. 13.1. THE LD. CIT DR SUBMITTED THAT THE INFORMATION UNDER SECTION 133 (6) WAS CALLED FOR AND SEGMENTAL WERE AVAILABLE. THE INFORMATION WAS CONFRONTED TO THE TAXPAYER ALSO AND ON A READING OF THE SPECIFIC REASONS BROUGHT OU T IN THE TPOS ORDER WHICH STAND UNASSAILED ON RECORD IT WAS ARGUED THAT THE COMPARA BLE SHOULD BE RETAINED. EMPHASIS WAS ALSO LAID ON THE FACT THAT IN 2007-08 ASSESSMEN T YEAR, THE EXCLUSION OF THIS COMPARABLE WAS NOT INSISTED UPON BY THE TAXPAYER. THE DECISION IN TELECORDIA TECHNOLOGIES INDIA PVT.LTD.(CITED SUPRA) IT WAS SUB MITTED DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION 13.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND ON FACTS THAT THE PRAYER OF THE TA X PAYER FOR EXCLUSION OF THE SAID COMPARABLE CANNOT BE OUSTED ON THE GROUND THAT IT W AS NOT OBJECTED TO IN THE PREVIOUS ASSESSMENT YEAR. WHETHER A PARTICULAR COMPARABLE IS ACCEPTED OR REJECTED IN A PREVIOUS ASSESSMENT YEAR CONSCIOUSLY OR INADVERTENTLY BY THE ASSESSEE OR THE AUTHORITIES IS NOT THE BASIS ON WHICH THE ISSUES CAN BE DECIDED. AS AN D ONE CHALLENGE IS POSED TO THE INCLUSION OR EXCLUSION OF A COMPARABLE THE CHALLENG E HAS TO BE CONSIDERED ON THE BASIS OF FACTS AND EVIDENCE ON RECORD FOR THAT YEAR. IT I S ONLY AFTER THE FACTS AND EVIDENCES ARE TAKEN INTO CONSIDERATION THAT THE RELEVANCE OF APPLYING A PRECEDENT WOULD COME INTO PLAY. IN THE FACTS OF THE PRESENT CASE, WE FIND TH AT THE REVENUES FROM THE SOFTWARE DEVELOPMENT SEGMENT OF THIS COMPARABLE CONSTITUTED 96% AND THIS FINDING OF FACT HAS NOT BEEN ASSAILED BY THE ASSESSEE. NO JUDICIAL PREC EDENT HAS BEEN RELIED UPON WHEREIN I.T.A .NO.-6485/DEL/2012 PAGE 24 OF 27 THE COMPARABLE ON IDENTICAL FACTS AND CIRCUMSTANCES WAS DIRECTED TO BE EXCLUDED BY ANY FORUM IN FACTS WHICH STOOD ON AN IDENTICAL FOOT ING. FOR READY REFERENCE WE REPRODUCE THE SAME FROM THE TPOS ORDER 70 AND 71:- 16.8. PERSISTENT SYSTEMS LIMITED THIS COMPANY WAS NOT CONSIDERED BY THE TAXPAYER IN ITS IP DOCUMENT AND IT IS NOT FINDING PLACE IN THE ACCEPT / REJECT MATRIX OF SOFTWARE COMPANIES ENCLOSED AS ANNEXURE TO THE IP REPORT. HOWEVER, THE DATA OF THE COMPANY IS AVAILABLE IN PROWESS DATABASE AND IS FINDING PLACE IN THE SEARCH MATRIX OF THE TPO. ANNUAL REPORT IS AVAILABLE FOR THE FY 2007-08. IT I S MAINLY A SOFTWARE DEVELOPMENT SERVICE COMPANY. THE COMPANY WAS ASKED INFORMATION U/S 133(6) TO SUBMIT THE SEGMENTAL / BREAK UP DETAILS R EGARDING SOFTWARE PRODUCTS AND SOFTWARE DEVELOPMENT SERVICES. AS PER THE INFORMATION SUBMITTED, THE SOFTWARE DEVELOPMENT CONSTITUTE 96% OF REVENUES FOR THE FY 2007-08 AND THUS QUALIFY THE FUNCTIONALITY CRITERIO N. THE COMPANY HAS REVENUES BY WAY OF PRODUCTS AS WELL AS SOFTWARE DEV ELOPMENT SERVICES., IN THIS REGARD, THE RELEVANT PORTION OF THE REPLY RECE IVED FROM THE COMPANY IS REPRODUCED BELOW:- (II) SOFTWARE PRODUCT COMPANY:PSL HAS DEVELOPED A F EW OF ITS OWN PRODUCTS IN THE AREA OF IDENTITY MANAGEMENT AND CON NECTORS. A SMALL PART OF PSLS REVENUE IS DERIVED FROM THIS TYPE OF ACTIVITY . THE FOLLOWING TABLE PROVIDES THE COMPOSITION OF REVENUE FROM DIFFERENT ACTIVITIES FOR PERSISTENT SYSTEMS LIMITED (ON STANDALONE BASIS) CONFIRMING TH AT APPROXIMATELY 95- 96% OF THE REVENUE IS DERIVED FROM PURE SOFTWARE DE VELOPMENT SERVICES:- PARTICULARS FY 2008 - 09 (RS. MILLION) FY 2007 - 08 (RS. MILLION) REVENUE FROM SOFTWARE DEVELOPMENT SERVICES 4,829.57 3,641.19 REVENUE FROM PRODUCT LICENSES 282.93 80.32 REIMBURSEMENT OF TRAVEL EXPENSES 84.41 107.26 TO TAL 5,196.91 3,828.77 THUS THE REVENUES FROM SOFTWARE DEVELOPMENT SERVICE S CONSTITUTE 96% OF THE TOTAL OPERATING REVENUES FOR THE FY 2007-08. TH US IT QUALIFIES THE TPO'S FILTER OF MORE THAN 75% REVENUES FROM SWD SERVICES AND IS CONSIDERED AS A COMPARABLE. THE SAME WAS COMMUNICATED TO THE TAXPAY ER VIDES THIS OFFICE SHOW CAUSE NOTICE. IN ITS RESPONSE, THE TAXPAYER HA S STATED THAT THIS IS A PRODUCT COMPANY WHICH IS NOT CORRECT AS EVIDENT FRO M THE ABOVE. DURING THE YEAR THE COMPANY HAS REVENUE FROM SOFTWARE DEVELOPM ENT SERVICE OF RS3641.19 MILLION, WHICH CONSTITUTES 95.1% OF TOTAL REVENUE. THUS IT PASSED THE SERVICE INCOME FILTER. HENCE THIS COMPANY RETAI NED AS A COMPARABLE. HOWEVER IT IS PERTINENT TO MENTION HERE THAT THE TA XPAYER DIDN'T OBJECT THIS COMPANY AS A COMPARABLE IN AY 2007-08. I.T.A .NO.-6485/DEL/2012 PAGE 25 OF 27 13.3. ACCORDINGLY IN THE FACTS AS THEY STAND WHICH REMAIN UNCONTROVERTED, WE FIND THAT THE PRAYER OF THE LD.AR HAS TO BE REJECTED. 14. EXCLUSION OF TATA ELXSI LIMITED (SEG) WAS SOUGHT ON THE GROUNDS THAT AS PER THE ANNUAL REPORT AND THE WEBSITE OF THE COMPANY IT WAS EVIDENT THAT THE COMPANY HAD DIVERSIFIED BUSINESS. THE REVENUE FROM THE SOFTWARE DEVELOPMENT AND SERVICES SEGMENT IT WAS SUBMITTED COMPRISED OF THE FOLLOWING 3 ACTI VITIES:- PRODUCT DESIGN SERVICES (DESIGN AND DEVELOPMENT OF HARDWARE AND SOFTWARE), INNOVATION DESIGN ENGINEERING (MECHANICAL DESIGN WI TH A FOCUS ON INDUSTRIAL DESIGN); AND VISUAL COMPUTING LABS DESIGN (ANIMATION AND SPECIAL EFFECTS) 14.1. IT WAS FURTHER SUBMITTED THAT IT FAILED THE R & D FILTER. THE FOLLOWING EXTRACT FROM THE CASE OF TELECORDIA TECHNOLOGIES INDIA PRIVATE LIMITED WAS RELIED UPON TO SEEK ITS EXCLUSION:- FROM THE FACTS AND MATERIAL ON RECORD AND SUBMISSI ONS MADE BY THE LEARNED AR, IT IS SEEN THAT THE TATA ELXSI IS ENGAGED IN DE VELOPMENT OF NICHE PRODUCT AND DEVELOPMENT SERVICES, WHICH IS ENTIRELY DIFFERE NT FROM THE ASSESSEE COMPANY. WE AGREE WITH THE CONTENTION OF THE LEARN ED AR THAT THE NATURE OF PRODUCT DEVELOPED AND SERVICES PROVIDED BY THIS COM PANY ARE DIFFERENT FROM THE ASSESSEE AS HAVE BEEN NARRATED IN PARA 6.6 ABOV E. 14.2. THE LD. CIT DR INVITING ATTENTION TO INTERNAL PAGE 78 OF THE TPOS ORDER SUBMITTED THAT IN THE FACTS OF THE PRESENT CASE SEG MENTAL DETAILS HAVE BEEN TAKEN INTO CONSIDERATION AS SUCH THE COMPARABLE SHOULD BE RETA INED. IT WAS ALSO HIS SUBMISSION THAT R&D FILTER HAS BEEN ADDRESSED AND IT IS ONLY 3 .9%. THE ORDER IN TELECORDIA TECHNOLOGIES INDIA PVT. LTD. (CITED SUPRA) IT WAS P OINTED OUT IS NOT OF THE SAME ASSESSMENT YEAR AND SEGMENTALS EVIDENTLY WERE NOT A VAILABLE THERE. I.T.A .NO.-6485/DEL/2012 PAGE 26 OF 27 14.3. CONSIDERING THE SUBMISSIONS OF THE PARTIES AND THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE TPOS ORDER ON THIS ISSUE IS NOT A SPEAKING ORDER AS IT IS VERY CRYPTIC IN MAKING A REFERENCE TO THE FACT THAT SEGMENTALS ARE AVAILABLE. HOWEVER, WHETHER THESE WERE CONFRONTED TO THE TAXPAYER OR NOT IS NOT COMIN G OUT FROM THE ORDER. MOREOVER, WHETHER THE TAX AUTHORITIES HAD THE BENEFIT OF STAN DALONE FINANCIAL DATA QUA THE SEGMENTALS AND WHETHER THEY WERE MADE AVAILABLE TO THE ASSESSEE IS NOT COMING OUT FROM THE ORDER. ACCORDINGLY, IN THE FACTS AS THEY S TAND WE DEEM IT APPROPRIATE TO ADDRESS THE PROCEDURAL DEFICIENCIES AND DEEM IT A PPROPRIATE TO RESTORE THE ISSUE BACK TO THE FILE OF THE TPO WITH THE DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW CONFRONTING THE TAXPAYER WITH THE FACTS TAKEN IN IN TO CONSIDERATION FOR ARRIVING AT A CONCLUSION ADVERSE TO THE ASSESSEE. THE ISSUE ACCO RDINGLY IS RESTORED. 15. THE EXCLUSION OF THIRDWARE SOLUTIONS LTD ( SEG) WAS SOUGHT ON THE GROUND THAT THE SAID COMPANY DERIVED INCOME FROM VARIOUS S OURCES SUCH AS SALE OF LICENSES SOFTWARE SERVICES, EXPORT FROM SEZ AND ON THE GROUND S OF NON AVAILABILITY OF SEGMENTAL DETAILS. RELIANCE WAS PLACED UPON TELECORDIA TECHNOLOGIES PVT.LTD. (CITED SUPRA) AND THE JUDICIAL PRECEDENT AVAILABLE IN ASSESSEES OWN CASE. INFORMATION SOURCED UNDER SECTION 133(6) WAS ALSO OBJECTED AS IT WAS NOT AVAI LABLE IN THE PUBLIC DOMAIN. 15.1. THE LD. CIT DR INVITING ATTENTION TO INTERNAL PAGE 78 OF THE TPOS ORDER AT PAGES 78 TO 80 SUBMITTED THAT SEGMENTAL WERE AVAILABLE A ND SHARED WITH THE ASSESSEES REVENUE FROM PRODUCT SALES WAS ONLY 0.74% AND FROM SOFTWARE DEVELOPMENT 97.47%. THE ANNUAL REPORT IT WAS SUBMITTED WAS PROVIDED TO THE ASSESSEE ON 29.09.2011. I.T.A .NO.-6485/DEL/2012 PAGE 27 OF 27 15.2. ON A CONSIDERATION OF THE SUBMISSIONS OF PARTIES B EFORE THE BENCH, WE FIND THAT THE TPO HAS GIVEN A CATEGORIC FINDING THAT THE REVE NUE FROM THE SOFTWARE DEVELOPMENT SEGMENT IS 97.47% AND THE SAID COMPARABLE QUALIFIES THE 75% SERVICE INCOME FILTER. THE OBJECTION OF THE TAXPAYER THAT SEGMENTAL INFORM ATION IS NOT AVAILABLE IN PUBLIC DOMAIN IS NOT OF ANY RELEVANCE. WHAT IS RELEVANT I S HAS THE INFORMATION UTILIZED BEEN SHARED WITH THE ASSESSEE OR NOT AND WAS THE STANDAL ONE FINANCIAL DATA SUPPORTING THE INFORMATION LOOKED INTO AND MADE AVAILABLE TO THE A SSESSEE. SINCE THE FACT OF STANDALONE DATA AVAILABILITY AND CONFRONTING THE SA ME TO THE ASSESSEE IS NOT COMING OUT FROM THE RECORD AVAILABLE IT THUS CANNOT BE SAID TH AT EFFECTIVE OPPORTUNITY WAS PROVIDED. ACCORDINGLY, WE DEEM IT APPROPRIATE TO RESTORE THE ISSUE BACK TO THE TPO. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 19 TH OF JULY, 2016. SD/- SD/- (L.P.SAHU) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR IT AT NEW DELHI